Small retailers are under increasing pressure from costs, paperwork and competition, says the director general of the British Retail Consortium.

With the Federation of Small Business calling for an inquiry into supermarket dominance, Dr Kevin Hawkins said small businesses were being unfairly penalised.

"For the smaller independent outlets cost inflation and red tape can have a big impact on the business' bottom line and productivity," he said.

"Large outlets, whilst affected, can absorb cost rises easier and have the resources to deal with red tape and other administration issues."

Speaking at a retail and consumer business dinner hosted by Deloitte, Eversheds and Barclays at the DeVere Belfry, Dr Hawkins highlighted rising costs.

Since 2003, the national minimum wage increased 20 per cent, property costs between five and ten per cent, transport costs last year by 15 per cent and energy costs rose a staggering 50 per cent, he said. Smaller businesses were hit by red tape, conflicting guidance and over-zealous, uncoordinated enforcement, he added.

"Life is hard enough competing with big brands such as Tesco and Asda, without having to worry about new regulations," Dr Hawkins said.

"And on top of this there is the threat from online shopping and the increase in discount stores such as Lidl, Netto and Aldi, where products are much cheaper than in well-known High Street chains."

Dr Hawkins' sentiments were echoed by business lobby group the FSB, which has called for an inquiry into what it describes as supermarket dominance of grocery.

It says the major super-markets operate a "monopoly position".

The FSB said it had written to the Office of Fair Trading calling for the issue to be forwarded to the Competition Commission for investigation. It wants to see how supermarkets deal with suppliers.

FSB trade and industry chairman Clive Davenport said: "Such domination of a vital part of UK commercial and family life, based on overly-favourable Government policy decisions and unfair trading practices, cannot be allowed. With a full and open inquiry, a balance can be found where supermarkets and small shops can co-exist."

The OFT has been evaluating whether to refer the matter to the Competition Commission since November.

It said in August a referral was inappropriate because of no breach of the code of practice regulating the grocery sector.

The watchdog pledged to re-examine the matter in November when the Association of Convenience Stores took the matter to the Competition Appeals Tribunal.